June 16, 2010

Arizona Hospital and Healthcare Association

John Rivers has served as the President and CEO of the Arizona Hospital and Healthcare Association since 1986. Now, after more than two decades as an advocate for hospitals and improving health care, Rivers is retiring from his post. Join us as we talk to Rivers about his job and how it’s changed through the years.

Guests:

John Rivers - President and CEO, Arizona Hospital and Healthcare Association

Ted Simons:
He's led the Arizona hospital and healthcare association since 1986, but later this year, John Rivers will retire. Under his leadership, the association sponsored successful ballot measures to raise taxes on tobacco products and expand access to health care. Here now to talk about Arizona healthcare issues past, present and future is president and CEO of the Arizona hospital and healthcare association, John Rivers. Always a pleasure. Good to have you.

John Rivers :
Thank you, Ted. Good to be here.

Ted Simons:
Why are you retiring?

John Rivers:
That's a simple answer. I've been working hard really ever since I started high school which is about 50 years ago. I'm going to be 65 in January of next year, and I think it's time for me to kick back and do a number of things that I've been postponing for the last 50 years. I'm very fortunate to have reached this stage. I'm in good health. Don't feel like pushing my luck. So I'm going to go do the things I've wanted to do all my life.

Ted Simons:
Before we get into current issues, what got you in this line of work?

John Rivers:
It was a fluke. I have found over the years most people end up in jobs they never imagined they would be in when they were in, you know, college. I had work when I got out of the service in 1971. I had walked into my hometown congressman's office. I was kind of a skinny kid at the time and brown from all the sun in Vietnam. I think he felt sorry for me. He hired me on a temporary basis. Three years later a lobbyist for the American Hospital Association came around to visit, and we got to talking and he thought I might enjoy a career in health care. I wound up being a lobbyist for our national hospital association for, for you know, a period of about five years. That was how I got into health care. So I just kind of snuck into it through the public policy side of the business.

Ted Simons:
The experience as an army infantryman, graduate of Notre Dame before heading overseas, those two particularly helped you along the line in certain ways?

John Rivers:
Well, those -- college and the military especially during war can be very defining experiences in your life. And that was true. I think anybody who was in college during the 1960s, if they can remember it, will tell you that it was a defining time in their life. A lot of turmoil in the country. You know, I'm very proud to be a Notre Dame graduate. I don't make any bones about it. You made me take off my pin a couple of times because it was glimmering in the camera. Of course the military is a different world altogether. It's an experience you don't ever forget, especially during wartime.

Ted Simons:
You are leaving during a very critical time in the health care industry.

John Rivers:
Yes.

Ted Simons:
Here in Arizona and really around the country. Talk to us about that.

John Rivers:
Well, I think, you know, every year that I've been in health care, 25 years now, almost 25, I have said to myself that it's going to be tougher next year than it was the year before. That's still true today. In fact, I think health care is going to be -- going to undergo -- it is undergoing a revolution right now in many, many ways. I think health care in this state is far better than it was when I came here 25 years ago.

Ted Simons:
How so?

John Rivers:
In a number of ways. Just look at our population alone. I mean, the population of Phoenix is three times what it was in 1986. So the Mayo Clinic wasn't here in 1986. You have all these brand new health care facilities built by Banner and CHW and other companies in areas that were vacant lots 25 years ago. So the physical side of healthcare has changed, but the delivery of health care has changed. We now have diagnostic tools that no one had even thought of 25 years ago. We have treatments that hadn't been invented yet. We have far more accountability in health care today than we had 25 years ago, far more transparency in health care than we had 25 years ago, and I think far more clinical integration which in laymen's terms means care coordination among different providers of care, including physicians and hospitals and others. It's a whole different game today than it was 25 years ago.

Ted Simons:
And yet the game, as you mentioned, is changing big time. Medicaid, $400 million from the feds supposed to be heading towards Arizona. Now, all of a sudden, that looks to be in jeopardy. What's going on there?

John Rivers:
Everybody thought this was going to be a slam dunk I'd say three or four months ago because there are a number of states, including Arizona, I think there are about 30 states altogether that are just going to be in really serious trouble without this added federal matching money for Medicaid. In Arizona, the State Legislature is counting on that money to fund what's called the prop 204 population, the childless adult population that is covered under our state Medicaid program and to fund a continuation of a scaled down KidsCare program. Without that additional federal money, they're going to have to find that money somewhere else and that's going to be very tough to do in this environment.

Ted Simons:
I was going to say, what happens if Congress doesn't pass?

John Rivers:
Well, if Arizona wishes to stay -- participate in the Medicaid program, which they're at least a million and a half people who hope they don't lose their health care coverage if Medicaid goes away, it's actually 1.2 million people in our state who are enrolled in access, the state simply has to comply with the federal what are called maintenance of effort requirements if they want to continue to participate in Medicaid and get that two for one match. Medicaid is roughly a $10 billion effort in the state of Arizona. Withdrawal from Medicaid would, in effect, shrink the Arizona economy by $10 billion. It would be interesting to hear Dennis Hoffman, what would it mean to the economy if you shrank it $10 billion overnight. I think he would tell you it would be a calamity for the state, not just the 1.2 million that would lose their health care coverage.

Ted Simons:
Long range, short range, vice versa strategy for health care providers in what looks to be a brave new world for health care, what are you seeing?

John Rivers:
I see a few things. Number one, I think I grew up in a world where it was a revenue game, you know, for health care providers. In the future it's going to be a cost game. It's not going to be how much revenue you can realize by providing more services. It's going to be based on your ability to control the costs. That's going to be a big drive in the future. I think the drive for further clinical intergration is going to be huge in health care. In laymen's terms means far more coordination between providers of care like physicians, far more coordination between hospitals, nursing homes, home care agencies and all the rest all centered around meeting the needs of the patient. And I think -- and I think we're just going to be more accountable and more transparent in the future as well.

Ted Simons:
What do you see regarding the immigration law? Obviously we talk about the societal impacts, economic impacts. What about your industry?

John Rivers:
Well, there has been an impact in health care. Our hospitals are telling us that they have seen, you know, fewer undocumenteds that appear in our emergency rooms needing care. We can document for, a fact, fewer births. In our hospitals now, I can't scientifically prove to you that there's a connection between that and declining number of Latinos in our community, but we think there is a connection between the two. So it has impacted health care, yes.

Ted Simons:
What about border area hospitals? How are they holding up?

John Rivers:
The border hospitals are of course affected more dramatically. Although the undocumented population, you know, it goes all the way up to the Utah border. It effects every corner of our state. The border hospitals, yes, more than other facilities. Where it tends to affect them are hospitals closer to the border is if you have a van filled with 15 undocumenteds that rolls over on the highway and all of a sudden you've got 15 critically ill patients that need to be transported to trauma centers where care is very expensive, that's where it impacts the hospitals on the border more than it does hospitals elsewhere.

Ted Simons:
I've heard concern that the law might hinder recruitment of health care professionals to Arizona. Viable? Valid I should say?

John Rivers:
I would hate to admit after 25 years I don't know everything. Ted, I don't know the answer to that question. You know, I think that's part of a broader issue of whether Arizona becomes a more desirable or a less desirable state for Latinos to live in, because we draw our caregiver population from the people who live here, you know. And frankly, we need more ethnic diversity on other health care work force, not less. I hope that doesn't happen. Quite honestly, I don't know if that's going to happen or not.

Ted Simons:
As far as advice for the incoming CEO, been there a long time, seen a lot of things, what would you say?

John Rivers:
Well, Laurie is a very capable young woman. She'll do an excellent job. I think she'll surpass me in pretty short order. My advice to her, and I'm careful how much advice I give her, is keep your head down. Keep in mind what's best for health care in Arizona. Keep in mind what's best for our community. If you do that, you're really going to serve the membership of the association very well. We've never thought of ourselves as a guild to use a Medieval term where we're here just to protect turf. The ballot measures you mentioned earlier, those were designed to expand access to health care for people in our community who are medically underserved. We think our mission is to do good, not just to do well. I think if she stays focused on that, then if she does well by Arizona, she'll be doing well by our members.

Ted Simons:
Got about a minute left.

John Rivers:
Okay.

Ted Simons:
Best memory, proudest achievement, all those years on the job, what do you got?

John Rivers:
Wow! I wished I had thought about that before I came on here. That's a very good question.

Ted Simons:
What comes to mind first?

John Rivers:
I would say probably the ballot measures that we've been involved in that have advanced health care significantly in Arizona. We have probably hundreds of thousands of people today in our state who are getting health care because of measures that we have supported in one way or another. So if -- I've never really thought of these things quite honestly as legacy stuff, for lack of a better term. We've always done them because we thought it was the right thing to do, not because it was going to look great on my resume. I would say those are the things I'm most proud. The other thing I would have to say, this will sound a little hokey, but I'm most proud of our members and the tremendous commitment they have to serving these communities here. That's what has really sustained me for 25 years.

Ted Simons:
It's always a pleasure having you on the program. Good to see you again. Good luck in the retirement.

John Rivers:
Thank you, Ted.

Economic Update

We’re hearing news on several fronts that the economy is improving. Arizona State University economists Jay Butler and Dennis Hoffman will discuss the latest, and talk about Arizona’s job and real estate markets.

Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. A slight uptick in retail sales and a recent increase in Phoenix area home prices. What does it all mean to Arizona's economy? And how long are the positive signs likely to last? Joining me to share their views on the state's economic climate are Jay Butler, an ASU real estate professor and ASU economist, Dennis Hoffman. Good to have you both here. Thanks for joining us.

Dennis Hoffman:
Good to be here, Ted.

Ted Simons:
First of all, let's start with the Arizona economy. How we doing out there?

Jay Butler:
Definitely leveling out. No longer sinking, sinking, sinking. There are signs of life, a couple of months of reasonably good news on a retail sales front. The one thing that jumped out at me in the April data is we had furniture and fixtures, we had automobiles up very, very nicely. Finally. I mean, these have been places where this economy has just been battered.

Ted Simons:
So the bigger ticket items, maybe not the biggest ticket items but bigger ticket items are doing well.

Dennis Hoffman:
At least for a month or so. If this continues for the next few months, we can say, hey, this thing has definitely turned. There are little signs of life.

Ted Simons:
Is there a chance for it to continue? We've talked about this on the show before, the idea that people aren't buying, they're not spending like they used to. Is that a curve? Is that a paradigm shift? What's going on here?

Dennis Hoffman:
This is the big challenge, Ted. Absolutely the big challenge. Some of the conventional models, we have to throw them out. If we look at historical norms in terms of purchasing, if we could just get -- if we could just get people to inch up towards those norms, not even achieve the full historical norms, we could inject 10 to 12 billion dollars of transactions into this economy. It would be very, very important. It would be a catalyst for job creation and confidence build.

Ted Simons:
Historical norms in real estate, what are we seeing right now?

Jay Butler:
Same problem. We've never been here before. We don't know -- the events we look at, are they the beginning of things or are they blips? Theres been a lot of preforcloure declining it declined early this year, late last year and then there was a sure of foreclosure activity. It's hard to go back and say this is what it looks like in history, because we haven't been there before. Historically foreclosures were at 3% and we're running right now, with a little better number, at 30%.

Ted Simons:
The slight increase in valley homes, do we make much of that? Is that likely to stay?

Jay Butler:
It's the price increase of what's being sold and beginning to move up the ladder. A lot of the entry level homes because the tax credit got sold, so you're doing a little bit of the moveup. We're seeing a lot of homes being foreclosed on or being sold back into the market by lenders or investors and being sold at somewhat higher prices, so there are some upticks in the price especially in the east valley.

Jay Butler:
About 30% of recorded resales are foreclosures. About half of the traditional sales are homes that were foreclosed on and are being sold. The traditional market of the owner occupant buying a home is a small share of the market right now. It's because, you know, underwriting guidelines are high, down payment requirements. Plus, the fact a lot of people bought good homes in the market and they're not ready to move on at this time.

Dennis Hoffman:
Absolutely, Ted. There's a very important linkage between this housing market and the confidence point we discussed a moment ago. It is impossible to base the economy level from the previous year on income alone. It's a wealth driven consumption shock. And if you look at the wealth that was lost in equities and the wealth that was lost in housing, it actually is worse than the Great Depression in terms of wealth loss. That explains some of this consumption depression, if you would, that we've seen in the data. So, Jay's points are very good. If housing can stabilize or even, you know, creep up a little bit or, you know, people can hear that their house price has not deteriorated much over the year, I think it can bolster confidence.

Ted Simons:
But the housing market is so dependent on jobs, is it not?

Jay Butler:
Well, it is. One of the things that is really driving the segment that is not measured real well, is there's a lot of renovation of housing going on. People have decided values are down, we can't sell this, but it's a good home so we're going to fix it up. We're going to go buy new furniture, we're going to remodel, fix it up. A lot of renovations have had -- renovation lending is one of the biggest areas right now. There is a growing sense of confidence. We've got to remember, as much of foreclosures impact, they're only 8% of our inventory the last couple of years. A large number of people are fairly happy in their homes, they just haven't had the confidence to make the improvements. Now they're feeling more confident in their jobs, more confident this is a good place to live.

Dennis Hoffman:
For those that are happy and those that have some equity -- there are some --

Jay Butler:
I'm one of them.

Dennis Hoffman:
I am one also. The home equity credit lines are at a historical low so you can finance these renovations Jay is talking about very, very cheaply.

Jay Butler:
I bought my home in '72 at 36. No matter how bad the market is --

Ted Simons:
I think he's crowing. Let's talk about the job market. What are we seeing out there?

Dennis Hoffman:
A little bit of stability in jobs. Arizona, again, one month does not a trend make. We had a good month of April in terms of the Arizona data. The job gain in Arizona in April compared very, very favorably with the pre-recession trends. I think it beat the ten-year average in terms of prior to the recession.

Ted Simons:
As far as per capita income as well, are we seeing anything definite happening there? Is it basically bumping along?

Dennis Hoffman:
Per capita income, this is a good one. I have a colleague -- my colleague and I, not sure that we trust the BEA's income data and we definitely don't trust the population data right now. Per capita income, you know, it's the quotient of these two things. So it's going to take a couple of years to shake this out. I think logically per capita income is flat to declining in this particular environment. But we have to figure out how many folks are actually still in Arizona.

Ted Simons:
Why is that difficult to figure out?

Dennis Hoffman:
Well, the census came out with some data in December that suggested the pace of in migration in terms of immigration in 2009 was about the same as it was in 2006. Does that make any sense to you, Ted?

Ted Simons:
Does that make any sense for the housing market?

Jay Butler:
No. The way they figure out estimates is they look at new housing units and figure population based on that. Since a lot of those units are vacant, we know a lot of the people aren't here. But in order for the market to grow, you've got to bring people into the market. That's going to be the big question. Will people move here? They'll only move here if they can find jobs. And are jobs better elsewhere? Are they better paying elsewhere?

Dennis Hoffman:
You know, we have some data that suggests -- what we're trying to do is explain the state-to-state movement, not the international migration. But actually the domestic migration because it's been a very important engine of growth in Arizona over the years. Certainly job creation, we're a people magnet because of our jobs, but they tend to move in more healthy economic times. In other words, even if jobs are fairly prevalent in their home states, they'll feel better about moving, they can sell their house, they can migrate. The problem with a deep downturn like this is people hunker down. They freeze. They don't want to move to Arizona, Florida, anywhere. The only place I can find that people are moving to is North Dakota.

Ted Simons:
I've heard about that as well. Interesting story. What, again, does that do to the foreclosure market, to the nonforeclosure market, the house market, the condo market? Are we waiting for everyone else to pick up and move?

Jay Butler:
Basically, yeah. Many of the foreclosure housing market are empties. The name of the deal is deal, whether it's for rent or sales price. Again, we're sort of population is, maybe not what they think it is, probably lower, that has some implications, especially in some areas that have serious housing issues.

Ted Simons:
Give us some ideas.

Jay Butler:
Well your looking at places like marryvale and El Mirage, a lot of the western communities because the infrastructure isn't in the area. On the other hand, some of the older communities in the east valley, Tempe, Gilbert and Chandler because jobs are there, the freeways are there, the schools are there. They're seeing somewhat of an earlier emergence of their housing market than elsewhere.

Ted Simons:
For someone selling their house right now with a sign in the ground or thinking about putting the sign in the ground and they're thinking back, I remember 2006, 2007. I remember the neighbor down the street sold for X. I want to try to get close to that. How long before that house equates to what X sold for?

Jay Butler:
A long time. If you bought a home in the hyper market in 2004, it's going to be quite awhile. Median prices back then were $270,000. We're looking at $140,000. We have a ways to go. That's frustrating a lot of people. Can they get back to the price? That's what their mortgage is based on. Some have simply said we're going to quit looking at the charts. We're just going to live in this thing. Others, strategic defaults, other issues come into play.

Ted Simons:
The idea- Go ahead.

Dennis Hoffman:
I was just going to point out anecdotally. My neighborhood is back to about 2003 prices. I think it's very neighborhood specific, and I would advise that individual to, you know, simply scout the neighborhood and figure out what the market is.

Ted Simons:
The numbers we talked about earlier, relatively positive numbers. Don't know how long they'll last, but they're there. How much is that due to the feds basically propping up the housing market?

Dennis Hoffman:
I think it's very important. I know there's a lot of debate in the profession about this. A lot of that debate is ideological, political, I think. I think logically the injection of money credited into the system was very, very important in attaining stabilization. There are some economists actually that argue we should be doing more. I think state and local governments nationwide are going to be challenged. We've seen that here in Arizona. We've injected some stability into our situation, but we haven't fixed the whole problem clearly. But I think government intervention, especially with respect to the credit policies and low interest rates, have been very, very important in stabilizing this economy. The challenge going forward is backing out. You know, at what pace do we back out? I know there's a lot of arguments politically that we need to be backing out now because of big deficits. From an economic perspective, I have far less problems with our big deficits today than I had with running deficits in 2005 and 2006 and 2004. Doesn't make any sense to me to run big deficits during good times federally. I understand why we have big deficits today. I think they've been very important in stabilizing this economy.

Ted Simons:
As far as the federal programs, propping up the housing industry in particular, but as Dennis mentioned, just the overall economy, how big a factor?

Jay Butler:
It's been a big factor. There were two articles yesterday talking about this issue. Home builders are losing clients, permits are declining we peaked at 900 permits about a year ago. The last infusion of past credit didn't do that much. So there's really concerns. Once you remove the stimulus, the market may disappear on you in this bigger situation, because you got to have the mobility factor. The problem with most of the housing is, for most people they got to sell a home. That's the big issue.

Ted Simons:
We'll stop it right there. Gentlemen, great discussion. Thank you so much for joining us.